Couples' Finances: Silence Is Not Golden

Christine Benz: Hi, I'm Christine Benz for Morningstar.com. A recent Fidelity study shows that many couples have a communications gap when it comes to their finances. Joining me to discuss this research is Kristen Robinson from Fidelity Investments.

Kristen, thank you so much for being here.

Kristen Robinson Darcy: Thank you for having me.

Benz: So, Fidelity periodically puts out these studies where you interview couples about their money habits, their communication around money. The latest study, I thought, had some pretty stark takeaways in terms of couple's communication on their finances. One is that couples don't even know what the other partner makes.

Darcy: That's right, Christine. So, we do these studies every two years, and we study over 1,000 couples. When we ask the question, "What does your partner make and bring home?" We found that 40% of these couples said that they do not know and, in fact, they didn't know by about $25,000. So, this is a big range.

Benz: So, you weren't saying you have to get it on the button, just in the right ballpark, and people weren't close.

Darcy: That's exactly right. It was a range. And what was really ironic was that before that question we asked if these couples were aligned with regard to their finances. And over 70% said, "Yes, we're aligned. We know we're on target. We're in the same place." Yet, only 40% knew how much their other spouse made.

Benz: So, you have some ideas about why this might be so. One is the fact that a lot of workers are doing more contract work. You think that is potentially an issue as well as maybe the fact that some pay is variable--people receive bonuses and stuff like that.

Darcy: Yes.That's right. And then, lastly, the stock market obviously fluctuates. And for those retirees who are withdrawing from their 401(k) accounts, their balance is obviously changed.

Benz: Another area where you found that couples aren't really intersecting is in terms of their investment assets. They are not necessarily clear on how much they have.

Darcy: Yes. That's absolutely true. Not only do they not know how much they make, they also are challenged with how many assets they have. About 50% of the respondents were unclear about that.

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Benz: So, there is a planning gap as well, in addition to the knowledge gap. Your research shows that many couples are not sitting down with each other and talking through some important planning issues--specifically related to retirement planning and what retirement will look like and how we will get there. Let's talk about that.

Darcy: Absolutely. That was another surprise that we found. Nearly 50% of these couples were not on the same page with what their retirement looked like. Then, we asked the question, "Are you on the same with regard to your finances? Do you know if your money will support you for the remainder of your life?" And about 50% were not on the same page with how much they really needed to save or have in place for the retirement. So, there was a disconnect.

Benz: When you say they are not on the same page about what retirement will look like, do you mean that they haven't talked through where they will live, whether one person will work part time--those sorts of things?

Darcy: Absolutely. That's something that we think couples, very early on, need to get on the same page about. So, for example, when they retire, do they want to travel the world or do they want to buy two homes or do they want to buy one? And those are the decisions that really need to be talked about so that when they look at the money they have for retirement, they can really understand how far their money will get them.

Benz: Another thing that jumped out at me in the study is that, even relative to a couple of years ago, you found that couples are worrying more about money. And it's kind of counterintuitive. The economy has been good. The market has certainly been quite good. So, why do you think that's happening?

Darcy: We found that the couples that are not worrying about it are the couples that have planned--the couples that have a retirement plan in place and have really spent time to map out their plan. They are confident that their money will last, and they are confident that their plan is the right one. It's those individuals who do not have a plan that are worrying. As more and more baby boomers are getting older, some of them are coming into retirement not prepared, and these are the ones who are really finding themselves in a very uncomfortable spot and not confident about what their plan is and what their future is.

Benz: In the study, you had some conversation starters for couples who want to try to bridge the planning gap or bridge the communication gap. You had some key topics that couple should try to talk about to make sure that they are at least on the same page as much as they can be. Let's talk about some of those key things--emergency funding is one.

Darcy: Yes, emergency funding is very important. Also, really understanding what your medium-term goals are. What do you want to do in the next three to five years? And then put a plan together for that. Also, you really need to make sure that you are in sync with what your plan is. Clearly, with this study, we found that couples thought they were in sync, but really when it came down to it, there were some disconnects in their financial foundation.

So, having those discussions, making sure that you have a clear understanding of what those priorities are, and then mapping out a plan is something that's really important. Also, starting early. For these young millennials, it's so incredibly important for them to make decisions together and also to start early. And that came right from our couples.

Benz: So, you did ask more seasoned couples to give their advice and that was one of the key pieces of advice. They said, "Get started on that retirement funding as early as you possibly can."

Darcy: Absolutely. And make decisions together--because the decisions that you make together will be the decisions that you continue to check up on on an ongoing basis. And you might need to change them as your life changes, but at least they will keep you on the same page.

Benz: One simple technique that I know you are a believer in is writing down your financial goals, asking your spouse to do the same, and then seeing where you have matches and where maybe you have mismatches. Then, those are things you need to talk about.

Darcy: It's very, very effective. We also have a couple's quiz that enables both spouses to have the quiz, and it identifies what those gaps are.

Benz: Obviously, couples have lot of work to do. Kristen, thank you so much for sharing this research with us.

Darcy: Great. Thank you for having me.

Benz: Thanks for watching. I'm Christine Benz for Morningstar.com.